Ninth Circuit Reverses District Court Dismissal in Corinthian

In U.S. ex rel. Lee v. Corinthian Colleges, The United States Court of Appeals for the Ninth Circuit reversed the District Court’s holding dismissing whistleblowers Nyoka Lee and Talala Mshuja’s False Claims Act complaint alleging Corinthian Colleges violated the Higher Education Act’s (HEA) ban on recruiter-incentive compensation.    Under the HEA, the federal government distributes funds to assist with the costs of secondary education.  In order to qualify for these funds, institutions must comply with a recruiter-incentive ban, which prohibits schools from providing any commission, bonus, or other incentive to recruiters based on the number of students they enroll.

Corinthian Colleges, a public company headquartered in Orange County, California, operates for-profit vocational schools throughout the United States.  On March 26, 2007, the whistleblowers filed a qui tam action on behalf of the United States government against Corinthian.  They allege that Corinthian, who receives billions of dollars from the federal government under the HEA, had fired recruiters and paid other recruiters bonuses amounting to 2.5% to 10% of their base pay based on the number of students they recruit.   The complaint also alleges that Corinthian falsely certified that it was in compliance with the HEA recruiter compensation prohibitions.

The case is remanded to the District Court.

Tagged: False Claims Act (FCA), Whistleblower Laws (Federal)